Gold steadies ahead of bumper week for central bank news

LONDON (Reuters) - Gold steadied on Monday ahead of a series of central bank meetings and President Donald Trump’s expected announcement of the next Federal Reserve chair.

A jeweler shows a finished gold necklace at a jewelry workshop in Peshawar, Pakistan July 13, 2017. REUTERS/Fayaz Aziz/Files

The U.S. central bank kicks off a two-day policy meeting on Tuesday, while the Bank of Japan and Bank of England also meet this week over interest rate policy.

Gold is highly sensitive to rising rates, which increase the opportunity cost of holding non-yielding bullion. Tighter U.S. policy also boosts the dollar, in which the metal is priced.

Spot gold was at $1,272.30 an ounce at 1430 GMT, little changed from its late Friday level but well off that session’s three-week low of $1,263.35. U.S. gold futures for December delivery were up 0.1 percent at $1,273.10 an ounce.

The metal is facing a slew of potential risks this week, including the U.S. monetary policy meeting and Fed chair announcement, closely watched payrolls data on Friday and ongoing unrest over Spain’s Catalonia region.

While the dollar index has taken a step lower on Monday, it remains close to its highest since mid July. [FRX/]

“It’s tough to short this market with the current geo-political situation,” Afshin Nabavi, head of trading at MKS, said. “This week apart from the non-farm payrolls, we also should hear from Trump about the Fed head.”

FILE PHOTO - A salesman shows gold bangles to a customer at a jewellery showroom during Dhanteras, a Hindu festival associated with Lakshmi, the goddess of wealth, in Kolkata, India October 28, 2016. REUTERS/Rupak De Chowdhuri/File photo

“The stronger U.S. dollar keeps gold under pressure, and the geopolitical situation keeps gold bid so (it will be at) $1,270-1,280 until some news comes out this week.”

Fed governor Jerome Powell, considered a moderate, is widely tipped to take over from Janet Yellen when she steps down as Fed chair in February.

Trump has said he has been considering both Powell and Stanford University economist John Taylor for the post and has also not ruled out re-nominating Yellen.

“The front end of the U.S. rates curve doesn’t seem to have priced in a Taylor Rule Fed ... which means that a surprise would send yields and the dollar higher, and risk assets down,” SG Forex said in a note on Monday.

“The market thinks Jerome Powell, more neutral in the market’s mind, is more likely.”

Speculators cut their bullish COMEX gold bets by 1,968 contracts to 173,043 contracts, U.S. Commodity Futures Trading Commission (CFTC) data showed on Friday, taking them to their lowest since early August.

Among other precious metals, silver was down 0.6 percent at $16.61 an ounce. Platinum was 0.2 percent lower at $912.75 an ounce, while palladium was up 0.2 percent at $967.70.